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Cardinal Energy Ltd. announces third quarter results

Nov 7, 2016

Calgary, Alberta – Cardinal Energy Ltd. ("Cardinal" or the "Company") (TSX: CJ) is pleased to announce its operating and financial results for the three and nine months ended September 30, 2016. The Company's unaudited financial statements and management's discussion and analysis for the quarter ended September 30, 2016, have been filed on the System for Electronic Document Analysis and Retrieval ("SEDAR") at www.sedar.com and on Cardinal's website at www.cardinalenergy.ca.

Financial and Operating Highlights

Cardinal achieved record average production of 14,957 boe/day, (87% oil and NGLs), an increase of 33% or 5% per weighted average share compared to the third quarter of 2015;

Production for the nine months ended September 30, 2016 increased 31% to 14,610 boe/d from 11,179 boe/d in 2015;

Operating expenses per boe for the third quarter decreased to $19.96/boe from $20.23/boe in the second quarter of 2016;

General and administrative expenses per boe decreased to $1.82/boe from $2.09/boe in the second quarter of 2016;

Cardinal invested $12.7 million in exploration and development capital expenditures and drilled 3 Glauconitic horizontal wells in Bantry in the third quarter of 2016; and

Cash flow from operations increased 7% to $18.2 million from the second quarter of 2016 and netback was $15.81/boe including realized hedging gains of $1.74/boe.

Message to ShareholdersThe third quarter of 2016 marked the 7th consecutive quarter of Cardinal maintaining a sustainable growth capital program in response to lower commodity prices. We will continue this type of maintenance capital spending in the fourth quarter of 2016 and expect to achieve average production for Q4 of approximately 15,000 boe/d. Our less than 15% production decline rate enables Cardinal to weather periods of low commodity pricing with minimum capital spending.

We continue to pursue initiatives to reduce our cost structure. Both operating costs and G&A per boe continue to be reduced quarter over quarter and we believe this trend will continue into 2017.

With the recent changes to the Alberta Energy Regulator's licensing framework and limits under the Liability Management Ratio ("LMR") for license transfers, Cardinal has focused on understanding and responding to the new regulatory framework. Cardinal has increased its abandonment and reclamation budget from $1.2 million to $3.2 million for 2016.

When the changes were announced on June 20, 2016, Cardinal's LMR of assets versus abandonment liabilities as determined by the formula set out in the program, was 1.68. The Company reacted immediately to the program changes and began an internal program to bring our LMR to 2.0, the level that is the new suggested temporary threshold for license transfers. We were able to increase the LMR to 1.75 in July without spending any money. We are progressing through our capital program for physical well abandonments and currently have an LMR of 1.94.

Subsequent to quarter end, we completed our semi-annual borrowing base review and in spite of the continued depressed commodity price environment our borrowing base has continued to be held constant at $250 million. Cardinal is in a strong financial position and at quarter end had net bank debt of $35.1 million and Q3/16 net debt to cash flow from operations of 1.2 X (including $50 million principal amount of convertible debentures).

Cardinal expects to release its 2017 guidance in early December when it hopes to have more clarity on oil pricing for next year. We have approximately 46% of our current oil production hedged at an average price of $62.88 CDN WTI per barrel for 2017. This hedging level would allow us to maintain our dividend at the current rate and to go through another year with a maintenance type of capital spending budget showing low single digit growth.

We expect that if there is transparency to an oil price above $50 WTI (USD) that we will be able to present guidance showing double digit growth for 2017.

About Cardinal Energy Ltd. Cardinal is a junior Canadian oil focused company built to provide investors with a stable platform for dividend income and growth. Cardinal's operations are focused in all season access areas in Alberta.

Forward-looking statements regarding Cardinal are based on certain key expectations and assumptions of Cardinal concerning anticipated financial performance, business prospects, strategies, regulatory developments, current and future commodity prices and exchange rates, applicable royalty rates, tax laws, future well production rates and reserve volumes, future operating costs, the performance of existing and future wells, the success of its exploration and development activities, the sufficiency and timing of budgeted capital expenditures in carrying out planned activities, the availability and cost of labor and services, the impact of increasing competition, conditions in general economic and financial markets, availability of drilling and related equipment, effects of regulation by governmental agencies, the ability to obtain financing on acceptable terms which are subject to change based on commodity prices, market conditions, drilling success and potential timing delays.

These forward-looking statements are subject to numerous risks and uncertainties, certain of which are beyond Cardinal's control. Such risks and uncertainties include, without limitation: the impact of general economic conditions; volatility in market prices for crude oil and natural gas; industry conditions; currency fluctuations; imprecision of reserve estimates; liabilities inherent in crude oil and natural gas operations; environmental risks; incorrect assessments of the value of acquisitions and exploration and development programs; competition from other producers; the lack of availability of qualified personnel, drilling rigs or other services; changes in income tax laws or changes in royalty rates and incentive programs relating to the oil and gas industry; hazards such as fire, explosion, blowouts, and spills, each of which could result in substantial damage to wells, production facilities, other property and the environment or in personal injury; and ability to access sufficient capital from internal and external sources.

Management has included the forward-looking statements above and a summary of assumptions and risks related to forward-looking statements provided in this press release in order to provide readers with a more complete perspective on Cardinal's future operations and such information may not be appropriate for other purposes. Cardinal's actual results, performance or achievement could differ materially from those expressed in, or implied by, these forward-looking statements and, accordingly, no assurance can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do so, what benefits that Cardinal will derive there from. Readers are cautioned that the foregoing lists of factors are not exhaustive. These forward-looking statements are made as of the date of this press release and Cardinal disclaims any intent or obligation to update publicly any forward-looking statements, whether as a result of new information, future events or results or otherwise, other than as required by applicable securities laws.

Non-GAAP measures This press release contains the terms "cash flow from operations", "netback", "net debt", "net bank debt" and "net debt to cash flow from operations" which do not have a standardized meaning prescribed by International Financial Reporting Standards ("IFRS" or, alternatively, "GAAP") and therefore may not be comparable with the calculation of similar measures by other companies. Cardinal uses cash flow from operations to analyze operating performance and assess leverage. Cardinal feels this benchmark is a key measure of profitability and overall sustainability for the Company. Cash flow from operations is not intended to represent operating profits nor should it be viewed as an alternative to cash flow provided by operating activities, net earnings or other measures of performance calculated in accordance with GAAP. Cash flow from operations is calculated as cash flows from operating activities adjusted for changes in non-cash working capital and decommissioning expenditures. The term "net debt" is not recognized under GAAP and is calculated as bank debt plus the principal amount of convertible unsecured subordinated debentures and current liabilities less current assets (adjusted for the fair value of financial instruments and the current portion of the decommissioning obligation). "Net debt" is used by management to analyze the financial position, liquidity and leverage of Cardinal. "Net bank debt" is calculated as net debt less the principal amount of convertible unsecured subordinated debentures. "Net debt to cash flow from operations" is calculated as net debt divided by cash flow from operations for the most recent quarter, annualized. The ratio of net debt to cash flow from operations is used to measure the Company's overall debt position and to measure the strength of the Company's balance sheet. Cardinal monitors this ratio and uses this as a key measure in making decisions regarding financing, capital expenditures and dividend levels.

Advisory regarding Oil and Gas Information In accordance with Standards for Disclosure of Oil and Gas Activities ("NI 51-101"), natural gas volumes have been converted to barrels of oil equivalent using a conversion rate of six thousand cubic feet of natural gas to one barrel of oil. This ratio is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. The term "boe" may be misleading, particularly if used in isolation.